Local sourcing and MNC subsidiary performance: a legitimacy perspective
Cross Cultural & Strategic Management
ISSN: 2059-5794
Article publication date: 11 May 2022
Issue publication date: 20 September 2022
Abstract
Purpose
Based on a legitimacy perspective, this study aims to investigate when local sourcing, as a strategic legitimacy action, improves or impairs subsidiary performance. The authors investigate the moderating role of regulatory/normative institutional distance in the relationship between local sourcing and subsidiary performance. Particularly, departing from prior relevant research, the authors reflect on the direction of institutional distance, categorizing it as either upward or downward institutional distance.
Design/methodology/approach
Using Japanese governmental data, this study performs a panel data analysis using a sample of 1,054 Japanese subsidiaries operating in 37 host countries over a 5-year observation period.
Findings
The authors reveal that downward regulatory/normative institutional distance more positively moderates the relationship between local sourcing and subsidiary performance than upward regulatory/normative distance.
Originality/value
There is little research that specifically discusses the performance effects of local sourcing while considering legitimacy concerns. Moreover, the results of analyses of the relationship between local sourcing and subsidiary performance in existing studies are inconsistent, suggesting that it is necessary to identify the boundary conditions under which local sourcing improves or impairs subsidiary performance. To fill these gaps, this study clarifies when local sourcing improves or impairs subsidiary performance based on a legitimacy perspective. The authors’ finding makes a clear contribution to the literature on strategic legitimacy actions and input localization in multinational corporations.
Keywords
Acknowledgements
The authors would like to sincerely thank Editor-In-Chief Professor Dr. Chinmay Pattnaik and two anonymous reviewers for their constructive comments. In addition, the authors would like to express special thanks to Professor Dr. Kazuhiro Asakawa for insightful recommendations on earlier drafts of the paper. This research was supported by JSPS KAKENHI [Grant numbers: JP17K13777 and JP20H01526].
Citation
Oki, K. and Kawai, N. (2022), "Local sourcing and MNC subsidiary performance: a legitimacy perspective", Cross Cultural & Strategic Management, Vol. 29 No. 4, pp. 729-760. https://doi.org/10.1108/CCSM-07-2021-0139
Publisher
:Emerald Publishing Limited
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